That's for your federal 1040 return. If you took the Standard Deduction on Federal last year the state refund is not taxable and you don't even need to enter it.
A State Tax Refund is taxable if you itemized deductions on that prior year's federal return and took a deduction for state income taxes instead of the sale tax. You got a deduction benefit for it so now you have to include it as income. If you took the standard deduction it is not taxable and you don't need to report it.
